Background: In the pluralistic environment of Indian healthcare financing system, community based health insurance (CBHI) holds promise to reduce the share of out of pocket (OOP) expenditure on healthcare by the households. The present study explores the extent to which the mutual model of CBHI could reach the socially and economically marginalized population along with investigating the reasons of drop-outs from the scheme in the city of Mumbai and Pune. Methods: This study used a cross sectional exploratory study method, using simple random method, conducted in slums of Mumbai and Pune. Results: The financial protection provided through health mutual fund (HMF) is still on the lower side when compared with annual OOP expenditure due to health by the household. The enrolment pattern shows that the scheme covers the marginalized people belonging to lower castes and minority community, employed in the unorganized sector. HMF is playing an important role in providing financial protection against the high frequency illness which is not covered under state sponsored schemes. Conclusion: Factors behind the members dropping out of the scheme were found to be no benefit from the scheme, inability to pay a premium, member of Employees State Insurance Scheme, unsatisfactory services from network provider and past negative experiences including claim rejection or low reimbursement. The study holds larger policy implications as there is limited study conducted to know the pattern of enrolment and exploring reasons of low rates of renewals.